The United States Office of Personnel Management provides a guide designed to help agencies and employees whose paychecks are impacted during a shutdown furlough. The guide answers questions about issues like backpay, paid time-off, benefits, and 357 additional pages worth of information.

What the guide doesn’t address, however, is whether an unpaid government employee needs to be worried about credit damage during the shutdown.

In short, the answer is yes. Government employees who are furloughed and essential employees who are still working but have their paychecks on hold, do need to be concerned about the possibility of credit damage if they fall behind on their bills.

The country is currently in week 4 of the longest government shutdown in history. If the freeze on wages continues, unpaid federal workers may soon be unable to pay their bills on time. Some workers without enough emergency savings could already be facing this reality as we speak.

Long reaching credit consequences

Derogatory marks on credit reports could be a big problem for consumers who are going without pay during the shutdown. Unfortunately, it’s not just a problem now. Any credit damage experienced by the affected government employees could have long reaching consequences which extend years into the future.

Here’s why:

  • The Fair Credit Reporting Act (FCRA) is the chief federal law that regulates credit reporting. There is no provision in the FCRA that protects the credit reports of furloughed government employees. If a late payment is made by a government employee who is currently going without pay, there’s nothing to prevent that late payment from showing up on a future credit report.
  • Any credit report damage resulting from unpaid bills and late payments may remain on credit reports for up to seven years.

Sadly, even if the credit bureaus wanted to, they could not prevent late payments from appearing on the credit reports of furloughed employees.

There is no way for them to identify which consumers are making late payments because of the shutdown and which consumers are making late payments for other reasons.

Potential solutions for unpaid federal workers

No matter your situation, you need to do everything possible to protect the health of your credit.

Here are some potential solutions to help you avoid credit damage, at least temporarily, until the government reopens:

Talk to your lenders

Some lenders are offering affected government employees a forbearance that temporarily suspends required monthly payments.

Lenders aren’t currently being forced to extend forbearances. (That would require an executive order or Congressional legislation.) For now, at least, it’s up to the lender to decide whether to offer relief to affected borrowers.

Although the credit bureaus don’t know whether you are impacted by the shutdown, you can communicate the problem to your lender. If your lender agrees not to report you as late to the credit bureaus, your credit report should stay safe.

See if you are eligible for unemployment benefits

Certain states are offering unemployment benefits to federal workers who are furloughed and going without pay as a result of the shutdown. However, federal employees who have been deemed essential and are still required to report for job duties may not be eligible, even though they aren’t currently receiving paychecks.

If you wish to apply for unemployment benefits, the United States Department of Labor website directs you to “contact your State Unemployment Insurance agency” for more information.

Additionally, it is worth noting that once the government reopens and employees receive the backpay which has been ordered by Congress and signed by the president, you may be required to repay any unemployment benefits you received in the interim.

Consider taking out a loan

Although taking out a new loan simply to keep up with your payment obligations on your old loans typically isn’t the best way to manage your finances, it may be worth considering in the short term.

Several lenders, banks, and federal credit unions are offering low-interest rate loans to help furloughed and unpaid government employees make ends meet until their paychecks resume.

If you’re thinking about borrowing money to stay afloat during the shutdown, here are a few options to consider.

  • USAA Government Shutdown Loan Program: The USAA Federal Savings Bank states on its website that “eligible members who are active Coast Guard, Coast Guard Reserve, National Oceanic and Atmospheric Administration Corp, the Public Health Service Corps and their spouses” may be eligible for a special government shutdown loan program, provided they have an existing relationship with the bank. USAA is also offering additional assistance for members who are impacted by the shutdown. To learn more, members are encouraged to call 800-531-USAA (8722).
  • U.S. Bank: U.S. Bank is offering a “low-rate, quick loan” option for customers who need financial assistance during the federal government shutdown. Qualified federal government employees can apply for a $100 – $6,000 loan and when U.S. Bank says it’s a low-rate loan, they mean it. The rate being offered on this 12-month loan product is only 0.01%.
  • Navy Federal Credit Union: Another financial institution offering government shutdown assistance loans is Navy Federal Credit Union. Per the credit union’s website, the loans are available to eligible borrowers for up to a maximum of $6,000. These loans are also interest-free and no credit check is required.

Until the shutdown ends and your regular paychecks resume, it may be wise to stretch the money you do have as far as possible. Even if you haven’t exhausted your emergency savings yet, it can’t hurt to ration your spending.

For example, you might want to consider making only the minimum payment on your accounts. You can ask all your lenders and loan servicers if they have forbearance options. You might even want to speak with your service providers (utilities, mobile phones, childcare, etc.) to see if they are willing to postpone payments until your pay resumes.

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